Ukraine said Russian tanks had flattened a small border town and pro-Russian rebels had made fresh gains in its east, as EU leaders signalled on Saturday they would threaten more sanctions against Moscow over the crisis.

Ukrainian President Petro Poroshenko, attending an EU summit in Brussels, said on Saturday he believed that efforts to halt violence with pro-Russian rebels were very close to a "point of no return" and that failure could lead to "full-scale war".

"I think we are very close to the point of no return. The point of no return is full-scale war, which already happened on the territory controlled by separatists," he told a news conference in Brussels after meeting EU leaders.

French president Francois Hollande arrives on August 30 2014 for a European Union summit at EU headquarters in Brussels.

He added, however, that a trilateral meeting on Monday involving representatives of Kiev, Moscow and the European Union could produce a ceasefire.

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Poroshenko was answering a question about an earlier comment he had made about the "point of no return."

Russia has repeatedly dismissed accusations from Kiev and Western powers that it has sent soldiers into its neighbour, or supported pro-Russian rebels fighting a five-month-old separatist war in Ukraine's east.

Ukrainian army personnel carry a Ukrainian government soldier injured by tank fire to an ambulance in the rebel-held town of Starobesheve, eastern Ukraine, on Saturday, August 30.

But Ukraine military spokesman Andriy Lysenko told journalists in Kiev that Russian tanks had entered the small Ukrainian town of Novosvitlivka on the border with Russia and fired on every house.

"We have information that virtually every house has been destroyed," Lysenko added, without giving details on when the reported attack took place. Ukraine's daily military briefings typically cover the previous 24 hours.

Lysenko said the rebels had made new gains just east of the border city of Luhansk, one of the rebels' main strongholds, after opening up a new front in another area last week.

"Direct military aggression by the Russian Federation in the east of Ukraine is continuing. The Russians are continuing to send military equipment and 'mercenaries'," Ukraine's defence and security council said in a separate Twitter post.

Kiev and Western countries say recent rebel gains were the result of the arrival of armoured columns of Russian troops, sent by Russian President Vladimir Putin to prop up a separatist rebellion that would otherwise have been near collapse.

There was no immediate fresh comment from Russia on Saturday. Putin on Friday compared Kiev's drive to regain control of its rebellious eastern cities to the Nazi invasion of the Soviet Union in World War Two.

According to a draft statement, EU leaders at Saturday's Brussels summit were set to ask the European Commission and the EU's diplomatic service "to urgently undertake preparatory work" on further sanctions that could be implemented if necessary.

French President Francois Hollande stressed that a failure by Russia to reverse a flow of weapons and troops into eastern Ukraine would force the bloc to impose new economic measures.

"Are we going to let the situation worsen, until it leads to war?" Hollande said at a news conference. "Because that's the risk today. There is no time to waste."

European Commission President Jose Manuel Barroso said the EU was prepared to toughen sanctions against Russia but also that it wanted a political deal to end the confrontation.

"We are ready to take very strong and clear measures but we are keeping our doors open to a political solution," Barroso said at a news conference with Ukraine's president.

Poroshenko said he expected to see progress toward peace soon, without going into details.

A senior UN human rights official said on Friday nearly 2600 civilians, Ukrainian government forces and rebels had been killed in a conflict which has led to the biggest Russia-West crisis since the Cold War.

In Kiev, Ukraine's Interior Minister Arsen Avakov said a group of pro-Ukrainian fighters had broken out of encirclement by pro-Russian rebels near Donetsk early on Saturday, though other reports suggested many remained trapped.

Several shots were fired on Saturday at a car carrying Alexander Zakharchenko, leader of the breakaway Donetsk People's Republic, but he escaped unscathed, another separatist leader, Sergei Kavtaradze, told Reuters.